Organisational Information Processing Theory (OIPT)

There are a number authors who propose that it is useful to view organisations as information- processing systems (Egelhoff, 1991). Some theorists have attempted to understand organisations by describing them as communication systems, decision making systems, or systems that have to cope with uncertainties (Egelhoff, 1991). Organisational Information Processing Theory as applied to organisations generally includes the gathering of data, the transformation of data into information, and the communication and storage of information in the organisation (Tushman and Nadler, 1978). Although definitions of the concept of OIPT vary and for certain purposes the distinctions may be important, they can all be subsumed under the broader notion of information processing.

Some of the known underlying assumptions of the theory of Organisational Information Processing are firstly, that the model is applicable to organisations with unstructured information processing activities. An organisation with disparate ERP systems, which do not communicate or integrate with each other, is termed as unstructured information flow. If the organisation had structured and organised information processing activities, then there could be minimal or no need for the introduction of an information processing system such as an ERP system. Secondly, OIPT assumes that the key factors involved in information processing are top managers.

The model applies to organisations whose information processing activities are characterized as informal and opportunistic; where the key actors are top managers. The model does not apply to organisations with organized and institutionalized information- processing activities where the key actors are top managers and scanning and interpretation staff (Wang and Chan, 1995).

In an organisation with organised and institutionalised information-processing activities, information-processing activities are perceived as being more complex and involving a greater number of steps. Firstly, employees carefully search the environment to gather required information (Wang and Chan, 1995). Secondly, employees apply available formal interpretation methodologies to analyze the meanings of the information collected, which could be manual or

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the section of the organisation or customers requiring the analyzed information. Fourthly, the analyzed information is either accepted or rejected, wholly or in part (Wang, 1991).

Valiris and Glykas (2004) argue that methodologies based on organisational theory add more elements to business modelling and analysis by addressing the need to focus on people (as agents), their accountabilities, roles, interactions, activities and use of available resources. This, in some way, has defined managerial input by stating controls, responsibilities and resources. OIPT involves three important concepts, which are: information processing needs, information processing capability, and the fit between the two to achieve optimal performance (Premkumar et al., 2005).

Organisations have continually identified the need for quality information to enable them cope with uncertainty in the business environment and to improve their ability to make informed decisions (Premkumar et al., 2005, Stock and Tatikonda, 2004). Gattiker and Goodhue’s (2004) study suggested OIPT as a valuable means to understand ERP systems. They used a case study to provide evidence that the concept of interdependence could be important in predicting the impact of ERP, particularly at local level. This could pose a challenge for organisations which might have experienced failed attempts in the past to mitigate this issue.

Uncertainty in the business environment stems from the complexity of the environment and from its dynamism, or the frequency of changes to various environmental variables (Premkumar et al., 2005). This is typical for service management companies where processes differ significantly from manufacturing. In addition, the processes in service management companies are dynamic from one customer site to the other. Organisations generally adopt two strategies to cope with uncertainty and increased information needs: firstly they develop buffers to reduce the effects of uncertainty on their business; and secondly, they implement structural mechanisms and information processing capabilities to enhance the flow of information and thereby reduce or even eliminate uncertainties. A common example of the first strategy within the service industry is building a time buffer into the time required for an engineer to carry out a job on a customer’s site in order to reduce the effect of uncertainty in the quality of services delivered. Within manufacturing an example of this is including safety buffers in the product design to account for uncertainty in the product’s working conditions, such as possible wastages and damages while producing the products. An example of the second strategy, mentioned by

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Premkumar et al. (2005), is the redesign of organisational business processes and the implementation of integrated IS that improve the flow of information and reduce uncertainty within various parts of an organisation (Gattiker and Goodhue, 2005).

Cooper and Wolfe (2005a) support this view, because they argued that ERP adoption activities vary with the extent of uncertainty; therefore the greater the uncertainty, the more information processing is required for effective performance of processes. The current research is informed by OIPT by adopting the second strategy to redesign the service company’s business processes and implementing an integrated Information System (IS) solution to improve information flow and process efficiency.

Although this theory does not categorically define the scope of managerial input, it however provides the opportunity of adopting one of its dimensions to understand how leadership input during pre-adoption and post implementation may contribute to the success of the ERP system within an HVAC service organisation.

OIPT was used by Cegielski et. al. (2012) to understand how an organisation’s information processing requirements and capabilities combine to affect the intention to adopt an information system. Although they employed this theory within a supply chain, it is arguable that a supply chain is a type of service management organisation. Therefore, this theory is applicable to evaluating the question of how an organisation’s information processing requirements and capabilities combine to affect the intention to adopt and implement an ERP system in a Heating, Ventilation and Air Conditioning (HVAC) service organisation.